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We are asked to determine whether the Michigan
Education Association (MEA) committed an unfair labor practice
under MCL 423.210(3)(c); MSA 17.455(10)(3)(c) and MCL 423.216;
MSA 17.455(16) of the public employment relations act (PERA) by
unilaterally implementing a midterm modification of a collective
bargaining agreement.

We affirm the decision of the Court of Appeals,
which upheld the conclusion of the Michigan Employment Relations
Commission (MERC) that the Michigan Educational Special Services
Association (MESSA) was an agent of the MEA and that the increase
in the lifetime maximum health care benefit was a violation of
the statute.

FACTS[1]

The Michigan Educational Special Services
Association is a Michigan nonprofit, nonstock corporation. Its
purpose is to provide various types of insurance benefits to its
membership. The MESSA bylaws restrict membership to Michigan
Education Association[2] members and certain specified categories
of employees with past or present ties to an MEA bargaining unit,
including employees of the MESSA itself.

The MESSA is not an insurance company; rather,
it is a policyholder that contracts with a qualified insurance
company to underwrite its various plans. Blue Cross/Blue Shield
of Michigan is currently the underwriter for MESSA health
insurance plans. Blue Cross and the MESSA share responsibility
for administering the plans. The MESSA qualifies as a
third­party administrator under the Insurance Code.

The MESSA is managed by a board of trustees
consisting of thirteen persons, all of whom must be MESSA
members. Under the bylaws, six trustees must be elected from and
by the MEA board of directors, and five must be elected by the
MESSA voting members. Voting members of the MESSA consist of the
incumbent trustees and officers of the MESSA and incumbent
members of the MEA board of directors, who are members of the
MESSA. The final two trustees are the president and vice
president of the MEA. The same person serves as the executive
director of the MEA and the executive secretary of the MESSA. The
MESSA has its own executive director.

The MEA "markets" the MESSA insurance
by persuading members of its constituent units and local
affiliates of the superiority of the MESSA plans and by
negotiating these plans into collective bargaining agreements
reached with employers. The MEA UniServ directors are largely
responsible for bargaining and for successfully negotiating
contracts, including MESSA plans. The UniServ directors are
evaluated in part by how well they achieve negotiation of the
MESSA products into collective bargaining agreements, and the MEA
is required to use its best efforts to negotiate MESSA benefits
into collective bargaining agreements. The MEA provides the MESSA
with legislative, lobbying, and research services. The MESSA
currently leases from the MEA the land on which its building
sits, and the current MESSA building is adjacent to MEA
headquarters. The MEA and the MESSA have a written agreement
under which the MESSA compensates the MEA for these services. For
the fiscal year 1989­90, the MESSA paid the MEA $1,400,424.

The MEA is the authorized collective bargaining
agent for the St. Clair School District’s teaching employees.
MESSA health coverage for at least some employees has been
included in the contract between the MEA and the school district
since approximately 1967. Article IX of the parties’ collective
bargaining agreement for the period ending June 30, 1991, reads:

The District agrees to pay premiums for health
insurance for each teacher through a carrier to be determined by
the Board. For the (3) year period 1988­89 through 1990­91, the
District agrees to provide MESSA Super Med II for 1988­89 and
MESSA Super Care II[3] for 1989­90 and 1990­91.

Total health insurance payments for any teacher
will not exceed the actual cost of the MESSA plan herein
outlined. There will be no supplemental payments by the Board.
The payments will be the full premium amounts for the MESSA plan
outlined herein for single, two persons, or full family coverage.

Effective July 1, 1990 and until a successor
Agreement is reached, the obligation of the Board to pay health
insurance premiums shall not exceed the Board’s base premium
amount for the 1990­91 insurance year, July 1, 1990 to June 30,
1991. If health insurance premiums effective July 1, 1991, exceed
the Board’s base premium for the 1990-91 insurance year, the
excess amounts over the individual employee’s premium cost, shall
be paid in full by the individual employee by way of payroll
deduction.

In addition, the school district signed an
"Employer Participation Agreement For Negotiated Group
Benefit Programs" with the MESSA in February, 1990. The
participation agreement includes the following paragraph:

If accepted for participation, the Employer
agrees to be bound by the terms of the Trust, the Equitable group
insurance policy(ies) and the BCBSM Group Operating Agreement(s)
and certificates issued to MESSA. Copies of the above may be
examined by any Participating Employer during the regular
business hours at the office of MESSA in East Lansing, Michigan.

In 1985, the MESSA changed its underwriter of
health insurance from the Equitable Insurance Company to Blue
Cross. The MESSA took the position that, because coverage in each
bargaining unit was pursuant to a collective bargaining
agreement, each employer and local association would have to
negotiate and agree to the change in carriers. The reason for
this position was that the MESSA hoped these negotiations would
force employers to pass the savings resulting from the change
along to employees, rather than permit employers to enjoy the
reduced premiums. The MEA and the MESSA asserted that the MESSA
hoped such negotiations would lead to purchase of other MESSA
insurance products.

Aside from this instance, however, the record
indicates that the MESSA, by action of its trustees, made minor
plan changes to insurance benefits without giving prior notice or
an opportunity to renegotiate the change to employers. One
change, other than the increase in the lifetime maximum made
unilaterally by the MESSA during the term of the parties’
1989­91 contract, was the addition of a wig benefit for cancer
patients.

On March 9, 1990, the MESSA staff presented the
trustees with a proposal to raise the lifetime maximum on all
MESSA plans to $2,000,000. Reasons cited to the trustees were
that several members were then approaching the maximum, the
effect of inflation in medical costs, and that competing plans
had raised their maximums. Beverly Wolkow, MEA executive director
and the executive secretary of the MESSA, argued against the
change on the basis that it would make MESSA insurance more
difficult to sell to employers at the bargaining table. However,
the change was approved by the trustees.

The school district was notified of this change
by letter dated May 8, 1990, which also described rate changes to
be effective July 1, 1990.[4] The school district did not make a
demand to bargain, but filed an unfair labor charge on the basis
that the change was an accomplished fact.

After the original hearing referee had heard
the case, a request by the school district to reopen the record
in order to add the MESSA’s affiliation/disaffiliation policy and
subsequent testimony to the record was granted by a subsequent
hearing referee. The affiliation/disaffiliation policy referenced
in the MESSA bylaws and adopted by the board of trustees in
March, 1982, provides that individual membership in MESSA health
insurance plans terminates for employees eligible for membership
in the MEA if the employees affiliate with a labor organization
other than the MEA. This information had not been available to
the school district before the original hearing because
commission procedure does not allow for prehearing discovery. The
affiliation/ disaffiliation policy was considered material to the
question whether there was an agency relationship between the
MESSA and the MEA. [5]

PROCEDURE

The hearing referee found that the MESSA was an
agent of the MEA and that the unilateral change in the benefit
maximum was an announced, not proposed, change in the contract,
resulting in a midterm modification of the collective bargaining
agreement. The hearing referee also held that the charging party,
the school district, had waived the right to bargain with respect
to benefit changes because under the contract, the employer
participation agreement bound the employer to the language of the
insurance certificates issued to the MESSA, thus allowing the
MESSA to modify or discontinue the group plan. The MERC affirmed
the ruling of the hearing referee[6] with the exception that it
disagreed that there was a waiver of the right to bargain over a
modification or unilateral action by respondents MEA and MESSA.
[7]

The Court of Appeals affirmed the MERC
decision, 218 Mich App 734; 555 NW2d 267 (1996), holding that, in
bargaining for the MESSA Super Care II policy, the Charging Party
bargained for the specific contents of the policy when the
collective bargaining agreement was entered and that the school
district was denied its opportunity to renegotiate before
unilateral change of the policy was effected, thus resulting in
an unfair labor practice. We granted leave to appeal. 456 Mich
899 (1997).

Mandatory subjects of collective bargaining are
comprised of issues that "settle an aspect of the
relationship between the employer and employees," Allied
Chemical & Alkali Workers of America v Pittsburgh Plate
Glass, 404 US 157, 178; 92 S Ct 383; 30 L Ed 2d 341 (1971),
and include, but are not limited to, terms and conditions of
employment concerning hourly, overtime, and holiday pay, work
shifts, pension and profit sharing, grievance procedures, sick
leave, seniority, and compulsory retirement age. Detroit
Police Officers Ass’n v Detroit, 391 Mich 44; 214 NW2d 803
(1974). Health insurance benefits are mandatory subjects of
bargaining. Port Huron Ed Ass’n v Port Huron Area School Dist,
452 Mich 309, 317, n 12; 550 NW2d 228 (1996). [10] Although the
PERA does not currently allow labor to bargain for "[w]ho is
or will be the policyholder of an employee group insurance
benefit,"[11] this does not "affect the duty to bargain
with respect to types and levels of benefits and coverages for
employee group insurance." MCL 423.215(3)(a); MSA
17.455(15)(3)(a). [12] Under subsection 15(3)(a) of the PERA,
changes in levels of benefits must be bargained by the employer
and the employees’ bargaining representative. [13]

The existing three-year collective bargaining
agreement between the school district and the MEA is the
manifestation of the parties discharge of their statutory
obligations. That is, "'[a]fter the parties have met in good
faith and bargained over the mandatory subjects placed upon the
bargaining table, they have satisfied their statutory
duty.’" Port Huron, supra at 322. The school district
approved the MESSA as the policyholder and agreed specifically to
the MESSA Super Med II and Super Care II programs as they existed
at the time of the agreement, which was memorialized in a written
contract[14] confirmed by both parties. By unilaterally modifying
the existing contract in midterm without the agreement of the
school district, respondent MEA, committed an unfair labor
practice. [15]

II

As an initial matter, this Court has
acknowledged the expertise and judgment possessed by the MERC in
the labor relations arena. We are also mindful of the fact that

[o]ur review of the commission’s decision is
circumscribed by the statutory mandate that factual findings of
the commission are conclusive if supported by competent,
material, and substantial evidence on the record considered as a
whole. MCL 423.216(e); MSA 17.455(16)(e), Const 1963, art 6,
Sect. 28. Review of factual findings of the commission must be
undertaken with sensitivity, and due deference must be accorded
to administrative expertise. Reviewing courts should not invade
the exclusive fact­finding province of administrative agencies
by displacing an agency’s choice between two reasonably differing
views of the evidence. MERC v Detroit Symphony Orchestra,
393 Mich 116, 124; 223 NW2d 283 (1974).[Amalgamated Transit
Union v Semta, 437 Mich 441, 450; 473 NW2d 249 (1991).]

The principal focus of this controversy centers
on the commission’s determination that the MESSA is an agent of
the MEA. The findings of fact made by the MERC are conclusive if
supported by substantial, material, and competent evidence on the
record as a whole. Independent review of the record supports the
following facts. [16]

The MESSA is not a labor organization, but is
an independent corporate subsidiary of the MEA and a member of a
family of organizations formed by and affiliated with the MEA,
the collective bargaining agent for the school district’s
employees. The MESSA’s original articles of incorporation
indicate that it was formed to "benefit . . . members of the
Michigan Education Association . . . ." The MESSA acts as an
insurance agent to provide various forms of insurance for members
of the MEA and acts as a third-party administrator under the
Insurance Code. The MESSA and the MEA have an interlocking board
of trustees consisting of thirteen persons, all members of the
MESSA. The MESSA bylaws require that six trustees must be elected
from and by the MEA board of directors and five others are
elected by the MESSA. The final two trustees are the president
and vice president of the MEA. Thus, the MEA holds a majority
voting position on the MESSA board of trustees. Additionally, the
positions of executive director of the MEA and the executive
secretary (or chief executive officer) are filled by the same
person. The performance of the executive director of the MEA is
evaluated by the MEA board of directors, in part on the basis of
how well the director controls and monitors the MESSA.

The MEA is the exclusive agent for the MESSA
and markets its products during the collective bargaining
process. The MESSA pays the MEA for its services, which
contractually its obligate school districts to provide MESSA
products. In 1990, the amount paid was over one million dollars.
The MEA professional staff has a group of employees called
UniServ directors, business agents for the MEA who bargain for
and administer contracts for MEA members. UniServ directors are
evaluated in part on the basis of how well they achieve
negotiation of MESSA products into collective bargaining
agreements. The MEA is required to use its "best
efforts" in obtaining employee participation in the MESSA,
and the UniServ staff is required to provide the MESSA with a
list of presidents and negotiators, copies of fringe benefit
contract language, and involve the MESSA in meetings where
bargaining guidelines are established. All school employee
members of the MESSA are either MEA members or employees of
school districts represented by the MEA. Because the MESSA is
solely dependant on the MEA to bargain for a role in insurance
coverage, its agreement with the MEA requires the MEA to actively
inform and consult the MESSA concerning collective bargaining
activities for insurance benefits. Numerous other documents
support the fact that the MESSA played a supporting role,
directly or indirectly, in the collective bargaining process.

When the MESSA board decided to change
underwriters of their health insurance program from Equitable to
Blue Cross/Blue Shield, the MESSA required that each employer
send a request to the MESSA approving the change. If the
insurance coverage was pursuant to a collective bargaining
agreement, the MESSA required a written notification jointly
signed by the employer and the local bargaining agent. This
action triggered collective bargaining in each unit, and the
savings to the employer resulting from the underwriter change
gave the union the opportunity to bargain with the employer for
the use of the savings. By this decision, the MESSA became part
of the bargaining process and significantly advanced the
bargaining interests of the MEA by enhancing the labor
organization’s ability to obtain additional benefits pursuant to
a new collective bargaining agreement.

Furthermore, the MESSA’s
affiliation/disaffiliation policy directly advanced the interests
of the MEA in derogation of the interests of the MESSA
membership. This policy requires that MESSA members who choose to
disaffiliate from the MEA by choosing another union to represent
their labor interests lose MESSA health insurance, despite the
fact that it is in the interest of the MESSA to retain membership
and in the interest of the MESSA members to retain their choice
of health insurance previously obtained through the bargaining
process. Testimony by an ex-executive director of the MESSA
explained that, because the MEA sponsored the MESSA, the MESSA
needed to maintain a good relationship with the MEA to assist in
bargaining MESSA’s benefit products. Without the disaffiliation
policy, movement away from an organization that helped the MESSA
could be encouraged. The MEA/ MESSA relationship was, as frankly
noted by the ex-director, one where "We scratched each
other’s backs . . . ."

"When there is a disputed question of
agency, if there is any testimony, either direct or inferential,
tending to establish it, it becomes a question of fact . . .
.’" Miskiewicz v Smolenski, 249 Mich 63, 70; 227 NW
789 (1929). In this case, the factual determinations were within
the province of the MERC, the designated trier of fact. Our
statutory mandate, MCL 423.216(e); MSA 17.455(16)(e), provides
that the commission’s factual findings are deemed conclusive
"if supported by competent, material, and substantial
evidence . . . ." We review the MERC’s factual findings with
the deference due administrative expertise and accept findings of
fact if supported by substantial evidence.[17] Substantial
evidence is "such evidence as a reasonable mind will accept
as adequate to justify conclusion" and requires judicial
review of the whole record. This entails a degree of qualitative
and quantitative evaluation of the evidence considered by the
agency. MERC vDetroit Symphony Orchestra, supra at
122.

III

Under the common law of agency, in determining
"[w]hether an agency has been created," we consider
"the relations of the parties as they in fact exist under
their agreements or acts" and note that in its broadest
sense agency "includes every relation in which one person
acts for or represents another by his authority." Saums v
Parfet, 270 Mich 165, 170-171; 258 NW 235 (1935). We further
recognized in Saums that "[t]he characteristic of the
agent is that he is a business representative. His function is to
bring about, modify, affect, accept performance of, or terminate
contractual obligations between his principal and third
persons." Id. at 172. Also fundamental to the
existence of an agency relationship is the right to control the
conduct of the agent, Capital City Lodge No 141, FOP v
Meridian Twp, 90 Mich App 533, 541; 282 NW2d 383 (1979), with
respect to the matters entrusted to him. See Int’l
Longshoremen’s Ass’n, AFL-CIO v NLRB, 312 US App DC 241, 249;
56 F3d 205 (1995), citing 1 Restatement, Second, Agency,
Sect. 14, p 60, and cases[18] applying this principle. [19]

We have long recognized that the PERA is
patterned after the National Labor Relations Act. The
construction of analogous provisions of the NLRA provides
guidance in interpreting the PERA. Goolsby v Detroit, 419
Mich 651, 660, n 5; 358 NW2d 856 (1984); Gibraltar School Dist
v Gibraltar MESPA, 443 Mich 326, 335; 505 NW2d 214 (1993).
Accordingly, although we have not previously determined the
meaning of the word agent as used in this context. [20] We
conclude that the Legislature did not intend an expansive
definition of agency in the PERA, but, rather, adopted the
common-law principles of agency in use in federal labor law. [21]
Regarding both management and labor, the NLRB and federal courts
have long held that the common law of agency governs the question
who acted for whom for purposes of determining
"culpability"[22] under the NLRA. NLRB v Int’l
Longshoremen’s & Warehousemen’s Union, 283 F2d 558, 563
(CA 9, 1960). [23]

We agree with both the hearing referee and the
MERC that the facts support a finding that more than a
"mere" agency relationship exists between the MESSA and
the MEA. The MEA created the MESSA as a subsidiary
corporation[24] and was the exclusive sponsor for MESSA products
other than to the MESSA’s own employees. Thus, the MEA and the
MESSA were bound by a formal affiliation and common agreement.
Under the MESSA bylaws, MEA members had majority control of the
MESSA board that made the decision to increase the benefit level.
This advanced the interests of the MEA and its members because
increasing the benefit level without having to renegotiate the
modification placed the MEA in a stronger position after the
expiration of the current contract to bargain from the position
of an accomplished change, a "done deal," so to speak.
The MESSA also had substantial input into the collective
bargaining process and had an agreement with the MEA to keep it
involved and informed concerning marketing of its products to the
MEA members.

The members of the MESSA, except for employees
of the MESSA itself, were all required to be members of the MEA
or employed in MEA controlled school districts. If the MEA no
longer represented the employees of a district, the
disaffiliation policy dictated loss of MESSA membership and
benefits, thus the MEA controlled both the MESSA membership and
access to MESSA benefits. This consequence advanced the interests
of the MEA at the expense of its own interests and the interests
of its members. We agree that these facts indicate a degree of
control over the MESSA by the MEA and substantial joint interests
advanced by their reciprocal agency arrangements.

While limited deference is accorded to the
commission’s analysis concerning common-law agency principles,
[25] in this case, we agree with and affirm the legal rulings of
the MERC. The facts support a finding of agency on the basis of
the common law of agency as developed both by Michigan courts and
federal administrative and judicial precedent.

V

Section 8 of the NLRA, 29 USC 158(b)(d)[26] is
analogous to the PERA provisions governing unfair labor practices
in Michigan. Subsection 8(d) of the NLRA describes the duties of
both employer and union when a party proposes a midterm
modification[27] of an existing agreement and includes
notification, negotiation, and a prohibition of strikes and
lockouts until the existing agreement expires. It also grants to
either party the right to refuse to discuss or agree to a midterm
modification of the contract and rejects the duty to bargain over
a modification of a collective bargaining agreement before it
expires. While the parties may agree to negotiate a change
midterm during the effective term of the written agreement,
bargaining is not required and is purely voluntary. Allied
Chemical Workers, supra at 183. [28] Failure to meet the
statutory requirements results in a violation of Sect. 8
resulting in an unfair labor practice by the party implementing
the modification. The hearing referee observed, and we agree,
that the same principle applies although the PERA has no explicit
provision akin to the NLRA, Sect. 8.

The lead federal case on this doctrine relies
primarily on Section 8(d) of the National Labor Relations Act,
which permits a party to refuse to bargain on a mid­term
modification. Oak Cliff­Golman Baking Company, 207 NLRB
1063 (1973), enfd 505 F2d 1302; 85 LRRM 1035 (CA 5, 1974), cert
den 423 US 826 (1975); 90 LRRM 2614 (1975). PERA contains no
similar provision, but the principle
applies. . . . To treat this solely as a
"unilateral change" and to fail to distinguish these
theories of violation of the bargaining duty would mean that a
party might give timely notice, bargain in good faith to impasse
and then "properly" implement a "unilateral"
change in an existing contract. Furthermore, the right to refuse
to bargain in mid­term may apply only where the subject has been
integrated and embodied in the agreement or discussed in
negotiations. . . . Here the modification consisted of a change
of one digit in a figure incorporated into the contract. Clearly,
this is a contract modification situation.

We affirm the conclusion that the benefit
change in the health insurance contract was properly designated a
midterm modification[29] of the agreement.

Once agreement is reached, the terms of the
written bargaining agreement are preserved and neither
management, Int’l Union v NLRB, 246 US App DC 306, 310;
765 F2d 175 (1985),[30] nor labor, Teamsters CanneryLocal
670 v NLRB, 856 F2d 1250, 1257 (CA 9, 1988)[31] may
unilaterally modify the agreement without the consent of the
other party. As we recognized in Port Huron, supra at 324,
when a matter is "covered by" the provision of a
collective bargaining agreement, the parties have created a set
of enforceable rules for themselves.[32] In short, both the NLRA
and the PERA provide "only a process by which the parties
might reach agreement, the power to agree to a proposal remains
with each party." Gibraltar School Dist, supra at
341-342. The statutory process authorized for midterm
modification of the existing bargaining agreement directs that
there can be no unilateral change without negotiation and
agreement of the parties. As we observed in Amalgamated
Transit, supra at 450:

Thus, while the parties may by contract agree
to grant the right to take unilateral action, it is well
established that neither party may take unilateral action on such
a subject unless it either has satisfied the statutory obligation
or has been freed from it.

The terms of the MEA contract with the school
district contained the specific health care coverage and benefit
levels bargained[33] for by the parties as required by statute.
This mandatory term was "covered by" the contract.
Because bargaining is not required during the term of the
contract, any change is voluntary. A midterm modification would
require the MEA and the MESSA to negotiate an agreement with the
school district to implement the change, just as the school
district would have had to reopen negotiations to decrease the
benefit level. The MESSA did not notify or negotiate an agreement
with the school district before implementing the change. The
MESSA’s board of trustees approved the increase of a maximum
lifetime benefit to two million dollars on March 9, 1990, and
informed the school superintendents of the change by letter dated
May 8, 1990.[34] The hearing referee properly determined that the
change was an "announced change" and not a
"proposed change."[35] Additionally, as recognized by
the hearing referee, the consequence of the notice has little
legal effect under a midterm modification theory because change
is not permissible absent mutual consent. Silence by the school
district in this situation could "preclude any change in the
contract."

The commission also reviewed the MEA assertion
that the school district had waived its right to bargain by
executing the collective bargaining agreement containing an
"Employer Participation Agreement." The claim was that
this agreement bound the employer to the insurance certificate
issued to the MESSA and that in the certificate the MESSA
reserved the right to modify or discontinue the group program at
any time. Disagreeing with these facts, the MERC found that this
language was not contained in the insurance certificate but,
rather, in a pamphlet distributed to employees explaining the
health care benefits provided by the MESSA. The MERC concluded
that the school district did not bind itself or surrender its
bargaining right through the pamphlet language. The parties do
not dispute this finding and the record supports it. We affirm
the commission’s conclusion.

The MEA also argued that the district had
waived its right to bargain by the past practice of acceding to
other unilateral changes made by the MESSA in the health care
contract. One example of change cited by the MESSA that occurred
during the contract period was the decision to cover the purchase
of wigs for hair loss resulting from chemotherapy. It is well
established that past practice may create a term or condition of
employment not incorporated in the collective bargaining
agreement, thus waiving the statutory obligation. Port Huron,
supra at 325. In this case, however, the term or condition
was specifically "covered by" the agreement.

As recognized by the MERC and confirmed in Port
Huron, supra at 319, there is a difference between whether a
subject is covered by a collective bargaining agreement and
whether the right to bargain about a mandatory subject has been
waived. We quoted with approval the opinion of Judge Harry T.
Edwards, a noted labor law scholar describing the distinction.

A waiver occurs when a union knowingly and
voluntarily relinquishes its right to bargain about a matter; but
where the matter is covered by the collective bargaining
agreement, the union has exercised its bargaining right and the
question of waiver is irrelevant.

* * *

When parties bargain about a subject and
memorialize the results of their negotiation in a collective
bargaining agreement, they create a set of enforceable rulesCa
new code of conduct for themselvesCon that subject. Because of
the fundamental policy of freedom of contract, the parties are
generally free to agree to whatever specific rules they like, and
in most circumstances it is beyond the competence of the
Authority, the National Labor Relations Board or the courts to
interfere with the parties’ choice. . . . On the other hand, when
a union waives its right to bargain about a particular matter, it
surrenders the opportunity to create a set of contractual rules
that bind the employer, and instead cedes full discretion to the
employer on that matter. For that reason, the courts require
"clear and unmistakable" evidence of waiver and have
tended to construe waivers narrowly. [Dep’t of Navy v Fed’l
Labor Relations Authority, 295 US App DC 239, 248; 962 F2d 48
(1992), quoted in Port Huron, supra at 319.]

As we explained in Port Huron, supra at
325-327:

In order to create a term or condition of
employment through past practice, the practice must be mutually
accepted by both parties. Amalgamated, supra at 454. Where
the collective bargaining agreement is ambiguous or silent on the
subject for which the past practice has developed, there need
only be "tacit agreement that the practice would
continue." Amalgamated, supra at 454­455. However,
where the agreement unambiguously covers a term of employment
that conflicts with a parties’ past behavior, requiring a higher
standard of proof facilitates the primary goal of the PERACto
promote collective bargaining to reduce labor­management strife.
A less stringent standard would discourage clarity in bargained
terms, destabilize union­management relations, and undermine the
employers’ incentive to commit to clearly delineated obligations.

Requiring a higher standard of proof when there
is express contract language to the contrary comports with
previous Michigan cases regarding modification. Generally,
parties are free to take from, add to, or modify an existing
contract. However, in the same way a meeting of the minds is
necessary to create a binding contract, so also is a meeting of
the minds necessary to modify the contract after it has been
made. . . . A collective bargaining agreement, like any other
contract, is the product of informed understanding and mutual
assent. To require a party to bargain anew before enforcing a
right set forth in the contract requires proof that the parties
knowingly, voluntarily, and mutually agreed to new obligations.

* * *

Once the employer has fulfilled its duty to
bargain, it has a right to rely on the agreement as the statement
of its obligations on any topic "covered by" the
agreement. "[T]he courts require ‘clear and unmistakable’
evidence of waiver and have tended to construe waivers
narrowly."

In the present context, we agree with the MERC
that the fact that the Charging Party or other school districts
may have tacitly or informally acquiesced to insurance benefit
changes does not prevail over contradictory contract language
under the standard of proof required by Port Huron, supra.
An increase in the lifetime maximum benefit level from one
million to two million dollars a person cannot be equated with
providing wigs for those limited numbers of subscribers requiring
this coverage. We affirm the commission’s decision that the
school district did not waive its right to renegotiate
modification of the term, nor did it extend to The MESSA the
right to unilaterally make benefit changes to the insurance
coverage specified in the contract.

V

The final argument advanced by the MEA and the
MESSA involves the assertion that, assuming arguendo the change
in the benefit level was a midterm modification, the other terms
of the collective bargaining agreement protected the employer
because any increase in health care premiums during the life of
the contract over and above the costs agreed upon were at
"no cost" to the employer.

The contract is the manifestation of the give
and take of bargaining regarding both economic and noneconomic
issues. The monetary and nonmonetary value of those
considerations are subsumed and integrated in the agreement. The
assertion that a change in the contract terms would not impose a
financial cost is no more a justification for an unassented
modification of contradictory contract language than if the
employer were to unilaterally extend the specified length of the
work day. [36]

Conclusion

We affirm the MERC’s determination. The school
district did not waive its right to negotiate for the change and
the commission properly required the union to reinstate the
original level of benefits to the MESSA health care plan as
ratified. Because the collective bargaining agreement had not
terminated, any change or modification had to be mutually
renegotiated. The charging party was entitled to insist on the
terms that had been specifically bargained for and memorialized
in the collective bargaining agreement. Respondent the MEA
violated subsection 10(3)(c) of the PERA through the independent
actions of the MESSA, its third-party agent.

The threshold question in this case is whether
the Michigan Education Special Services Association (MESSA) acted
as an agent of the Michigan Education Association (MEA). I would
find that the MESSA did not act as an agent of the MEA when it
increased the lifetime maximum health care coverage for MESSA
policyholders.

The Michigan Employment Relations Commission
(MERC) made a substantial and material error of law when it
adopted the reasoning of the hearing referee.[37] The hearing
referee’s conclusion that the MESSA acted as an agent of the MEA
was made, not by applying the ability-to-control test, but
through a newly created "symbiotic-relationship" test.
The majority appears to have endorsed that test. I find that the
proper test is the control test. Applying it, I conclude that the
MERC decision is not supported by substantial evidence sufficient
for a reasonable mind to accept as adequate to justify its
conclusion.

I

The leading case in Michigan jurisprudence on
determining whether an agency relationship exists under the
public employment relations act (PERA),[38] is Capitol City
Lodge No 141, FOP v Meridian Twp, 90 Mich App 533; 282 NW2d
383 (1979). There, the Court concluded that to hold that the
Ingham County Sheriff is an agent of Meridian Township requires a
finding that the township has a right to control an elected
official. The finding would have no basis in law or fact, as the
township did not have the actual ability to control the actions
of the sheriff. In fact, the township requested that the sheriff
not take the action he did, but was unable to prevent it.

The Court of Appeals recognized that the
"right to control an agent is fundamental to the existence
of an agency relationship." Id. at 541, citing Nat’l
Labor Relations Bd v Local No 64, Falls Cities Dist Counsel of
Carpenters, 497 F2d 1335, 1336 (CA 6, 1974). Though the
majority in this case also acknowledges the edict, it fails to be
guided by its wisdom.

The majority’s analysis focuses on the
significant amount of overlap between the MEA and the MESSA. It
appears to endorse the symbiotic-relationship test. A similar
detailed examination of areas not relevant to the immediate
decision is absent from the analysis in Capitol City Lodge.
Rather, the Court there concentrated its attention on the exact
decision at hand, the termination of the deputy’s employment, and
found no ability to control. In fact, the Court found a futile
attempt by the township to prevent the action from occurring.
Here, I find that the MEA, likewise, engaged in a futile protest
against action taken by the MESSA, rather than actually
controlling the decision under consideration. In Capitol City
Lodge, the Court found no need to focus extensively on the
interworkings of the close relationship between the township and
the sheriff beyond the matter in question. Its attention was on
the actual decision leading to the charged action. Where the
majority looks primarily at extrinsic aspects of the relationship
between the MEA and the MESSA, it is ignoring Capitol City
Lodge’s teaching, despite acknowledging its applicability.

Like Capitol City Lodge, in this case,
the MEA lacked the ability to control the actions of the MESSA.
In fact, the MEA, through its executive director, Beverly Wolkow,
specifically opposed the disputed increase in lifetime benefits.
Even in the face of her direct opposition, the MESSA’s board of
trustees voted to increase the insurance coverage.

We are mindful that this board consists of
thirteen persons, all of whom must be MESSA members. Of these
thirteen, six trustees must be elected from and by the MEA board
of directors and two trustees are the president and vice
president of the MEA. Thus, a majority of the MESSA board members
are from the MEA.

Regardless of its majority, the MEA was not
able to control the MESSA board when it decided to increase the
lifetime benefits for its members. That is because those trustees
owe a fiduciary duty to the board on which they sit, regardless
of their other affiliations.[39] Thus, while the MEA members sit
on the MESSA board, they vote in conformity with their fiduciary
duty to the members of the MESSA and not to the MEA.[40]
Frequently, the best interests of the MESSA membership will be
aligned with the best interests of the MEA membership; even so,
mutual interests are insufficient to establish control.

II

As noted by the majority, the relationship
between the MEA and the MESSA is that of parent-subsidiary. As
this Court recently stated:

Additionally, as the United States Court of
Appeals for the Sixth Circuit recently reaffirmed in a case
involving a parent-subsidiary relationship:

Michigan appears to follow the general rule
that requires demonstration of patent abuse of the corporate form
in order to pierce the corporate veil. There must be such a unity
of interest and ownership that the separate personalities of the
corporation and its owner cease to exist, and the circumstances
must be such that adherence to the fiction of separate corporate
existence would sanction a fraud or promote injustice. [United
States v Cordova Chemical Co of Michigan, 113 F3d 572, 580
(CA 6, 1997).]

The MESSA is, as acknowledged by the majority,
a Michigan nonprofit, nonstock corporation, hence, a separate
entity from the MEA.

The symbiotic-relationship test impliedly
ratified by the majority today is inconsistent with the
well-established rule that separate corporate identities will be
respected, absent a substantial abuse of the corporate form.
There is no evidence of any abuse of the corporate form by the
MEA and the MESSA. The two are separate entities, as shown by the
inability of one to control the other. There is no evidence of an
understanding that one will act on behalf of the other, subject
to that party’s control.

The majority’s decision today allows an erosion
of the distinction between parent corporations and their
subsidiaries. It permits a "symbiotic relationship" to
suffice for the conclusion to be drawn that an agency
relationship exists, absent evidence of the ability to control.
This finding defeats the very purpose for which many corporations
create subsidiaries­­­to insulate themselves from liability in
connection with the subsidiary’s activities. Absent a showing of
abuse of the corporate form, the corporate veil should not be
pierced. The majority has allowed that veil to become so porous
as to allow the protection it previously provided to escape.

The MESSA has continually acted as a separate
entity, making decisions that depart from what the MEA wished
would occur. For instance, when the MESSA was searching for a new
headquarters, negotiations between the MESSA and the MEA broke
down over the price of MEA-owned property. The MESSA looked
elsewhere for land before the MEA lowered the price to an
acceptable level.

The majority states that the
affiliation/disaffiliation policy of the MESSA was considered
material to the question whether there was an agency relationship
between the MESSA and the MEA. The policy permits enforcement of
the membership requirements in the MESSA’s bylaws and furthers
the MESSA’s marketing goal of being identified as offering
MEA-affiliated products. To maintain its tax-exempt status as a
voluntary employees’ beneficiary association under subsection
501(c)(9) of the Internal Revenue Code, the MESSA must comply
with the requirement that MESSA members share an
"employment-related common bond." 26 CFR
1.501(c)(9)-2(a). In this case, that common bond is the education
industry.

Simply because the MEA markets MESSA products
does not demonstrate an agency relationship. It makes good
business sense for the MESSA to concentrate its efforts on a
particular group in the education industry, teachers. Thus, it
solicits the aid of the MEA to market its products and pays the
MEA for it. The MEA provides the MESSA with a unique opportunity
to present its products to an attentive and select audience.[41]
The existence of a homogenous client base does not suffice to
establish an agency relationship.

I acknowledge that the two entities have many
similarities and overlapping concerns. However, the existence of
entanglements without the ability to control is not enough to
establish an agency relationship.

Because I do not find the existence of an
agency relationship between the MEA and the MESSA, I do not reach
the issue whether the MEA committed an unfair labor practice.
Unless the MESSA is found to be an agent of the MEA, its actions
are not governed by the PERA. Without a finding of agency, this
Court has no jurisdiction over the MESSA to grant the relief
requested under plaintiff’s PERA claim.

I would reverse the Court of Appeals decision
because it has not been shown that the MEA has the ability to
control the MESSA. Additionally, there is powerful evidence to
show that the MESSA did not act on behalf of the MEA when its
board decided to increase the lifetime health benefits.

[1]We determine that the facts as reported by
the hearing referee and the MERC are supported by the record and
adopt the agency findings set forth below.

[2]The MEA has a family of related
corporations, which include the MESSA, the Michigan Education
Data Network Association (MEDNA), and MEA Financial Services.

[3]The hearing referee also stated that the
MESSA’s current certificate on file with the Michigan Insurance
Bureau for its Super Care II plan contained the following
information: "MESSA reserves the right to modify or
discontinue the group program at any time."

[4] The MESSA adjusts its premium rates every
year on July 1. Both experience factors and predictions of future
costs go into the rate computations. On July 1, 1990, MESSA rates
were increased by two percent.

[5] The MERC affirmed the finding of the
hearing referee.

[6] The MERC stated:

All other rulings and findings of the [hearing
referee] not specifically dealt with in the forgoing are hereby
affirmed. [1993 MERC Lab Op 101, 106.]

[7] The MERC ruled:

We are thus confronted with the unique
situation in which a union is accused of violating its bargaining
obligation imposed by Section 10(e) of PERA, by unilaterally
changing a condition of employment. This posture of the case, as
is apparent from the Decision and Recommended Order with which we
agree, stems from the fact that MESSA is the holder of the health
insurance policy negotiated by the Intermediate Education
Association.

In regard to the waiver finding of the [hearing
referee] we agree with the Charging Party that there was no
waiver of the bargaining obligation relative to the change in
insurance benefits. The finding of the [hearing referee] was in
error inasmuch as it found that an insurance certificate stated
"MESSA reserves the right to modify or discontinue the group
program at any time." The language quoted above is not
contained in an insurance certificate but in a MESSA booklet or
pamphlet prepared for MESSA distribution explaining the benefits
provided by the health insurance. This for the consumption of the
recipient employees. The conclusion that Charging Party either
bound itself, or surrendered its bargaining right, through the
pamphlet containing the statement that "MESSA reserves the
right to modify or discontinue the group program at any
time" is in error.

This Commission in the past has demanded that
waivers of bargaining rights must be clear, explicit, and
unmistakable. . . . In the case at hand the document relied upon
as waiving the employer’s right to bargain about unilateral
changes in benefits was not executed either as a part of a
collective bargaining agreement or incorporated by reference as a
part of a collective bargaining agreement. In sum, we find that
there has not been any contractual waiver of the bargaining
obligation by the Charging Party.

Included in the waiver exception is the
Charging Party’s contention that the Charging Party did not waive
its right to be bargained with relative to a change in working
conditions through past practice as found by the [hearing
referee]. We have little difficulty with the conclusion that
agreed­upon past practice, not incorporated in a collective
bargaining agreement, may well have the effect of creating a
condition of employment and waiving those statutory obligations
owed to a collective bargaining agent or vice­versa. We however,
cannot find that a practice or pattern of action that has existed
in the past either though [sic] error or lack of knowledge
prevails over contradictory contract language. Thus a bargaining
agent that did not know of a public employer’s paying an employee
less than the contract wage in the past cannot be said to have
waived either its exclusive bargaining rights as provided by PERA
or its contractual right under such circumstances. In the case at
hand the [hearing referee] determined that MESSA had previously
changed benefits without bargaining and had the right to do so.
This is clearly in error. We agree with the Charging Party that
the fact the Charging Party or other school districts may have
tacitly or informally acquiesced in insurance benefit changes in
the past does not extend to MESSA the freedom to unilaterally
make whatever changes in benefits it may desire.

Based on the foregoing we find that there was
no waiver of the bargaining obligation and we find that the
unilateral change in the maximum benefits that was made without
bargaining with the Charging Party violated the obligation to
bargain imposed by Section 10(3)(c) of PERA. We further agree
with the Charging Party that there was no necessity, nor was it
possible, for the Charging Party to request bargaining over the
change which was already an accomplished fact when the Charging
Party was notified of the change made by MESSA, as the agent of
the Intermediate Education Association/Michigan Education
Association. The Commission has in the past determined that the
obligation to request bargaining is waived if such a request
would have been either futile or the bargaining subject change
was a fact accomplished when notification was received. We
disagree with the conclusion of the [hearing referee] that 1 day
prior notification to the Charging Party on May 8, 1990, of a
change that was made on March 9, 1990, was sufficient notice.
[1993 MERC Lab Op, n 5 supra at 104-106.]

The MERC found the MEA and the MESSA in
violation of the PERA and ordered the MESSA to reinstate those
lifetime maximum benefits existing before March 9, 1990, and to
cease and desist from making unilateral changes in terms or
conditions of employment of the employees of the school district
witTHE hout prior notification and affording time for collective
bargaining.

[8]MCL 423.210 states:

(1) It shall be unlawful for a public employer
or an officer or agent of a public employer

(a) to interfere with, restrain or coerce
public employees in the exercise of their rights guaranteed in
section 9 . . .

(e) to refuse to bargain collectively with the
representatives of its public employees, subject to the
provisions of section 11.

* * *

(3) It shall be unlawful for a labor
organization or its agents . . .

(c) to refuse to bargain collectively with a
public employer, provided it is the representative of the public
employer’s employees subject to section 11 [MCL 423.211; MSA
17.455(11).]

[9]MCL 423.215; MSA 17.455(15) states:

A public employer shall bargain collectively
with the representatives of its employees as defined in section
11 and is authorized to make and enter into collective bargaining
agreements with such representatives. For the purposes of this
section, to bargain collectively is the performance of the mutual
obligation of the employer and the representative of the
employees to meet at reasonable times and confer in good faith
with respect to wages, hours, and other terms and conditions of
employment, or the negotiation of an agreement, or any question
arising thereunder, and the execution of a written contract,
ordinance or resolution incorporating any agreement reached if
requested by either party, but such obligation does not compel
either party to agree to a proposal or require the making of a
concession.

The matters described in subsection (3) are
prohibited subjects of bargaining between a public school
employer and a bargaining representative of its employees, and,
for the purposes of this act, are within the sole authority of
the public school employer to decide.

[12]MCL 423.215(3); MSA 17.455(15)(3) states:

Collective bargaining between a public school
employer and a bargaining representative of its employees shall
not include any of the following subjects:

(a) Who is or will be the policy holder of an
employee group insurance benefit. This subdivision does not
affect the duty to bargain with respect to types and levels of
benefits and coverages for group insurance.

[13]MCL 423.215(3)(a); MSA 17.455(15)(3)
states:

A change or proposed change in a type or to a
level of benefit, policy specification, or coverage for employee
group insurance shall be bargained by the public school employer
and the bargaining representative before the change may take
effect.

[14]AThe employer can fulfill its statutory
duty by bargaining about a subject and memorializing resolution
of that subject in the collective bargaining agreement." Port
Huron, supra at 317-318.

[15]A modification "is a prohibited unfair
labor practice only when it changes a term that is a mandatory
rather than a